Stocks to move in tight range as it establishes base

Font Size

By Arra B. Francia,

LOCAL SHARES may trade in a tighter range this week, with investors setting their eyes on March inflation and the second package of the tax reform program.

The Philippine Stock Exchange index (PSEi) lost 0.83% or 67.20 points to 7,979.83 last Wednesday, but managed to gain 0.11% on a weekly basis. This was supported by a 1.8% increase in the financials sector alongside a 1.6% uptick from industrials.

Trading also thinned prior to the Lenten break, with turnover dipping 10% to P7.8 billion on average. Still, advancers outpaced losers last week, 109 to 95.

With the main index moving around the 7,900 area, Eagle Equities, Inc. Research Head Christopher John Mangun said investors may finally start coming back into the market.

“The index has held the 7,900 support area which to me may potentially be a bottom for this correction. If it continues to hold this area in the following week, this may signal investors that this is a good time to start buying into this market again after being on the sidelines for the past couple of months,” Mr. Mangun said in a weekly report.

Online brokerage, meanwhile, noted that the index would have to build a strong base at the 8,000 level in order to cement its run toward new highs. The company said leads for the week include expectations on March inflation.

“At home, attention will revert to March inflation and possibilities from monetary authorities to consider adjusting their policy stance in their next meeting. It should be noted however, there are tools available, including reserve requirement adjustment,” said in a weekly market note.

Investors are also expected to look at the second package of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which will put the spotlight on businesses. The second phase of the tax reform program, as per the draft by the Department of Finance, seeks to cut corporate income taxes (CIT) to 25% from 30%, while also calling to repeal around 30 special laws that grant incentives to investors.

TRAIN 2 likewise aims to rationalize tax incentives under the Philippine Economic Zone Authority.

“Investors will also heed for sequels to government’s (TRAIN 2), specifically on CIT and the Finance’s stance in present and subsequent investment incentives. This crucial package must be balanced carefully, to ensure continuity of long-term direct investments in the Philippines, especially for capital-intensive undertakings,” said.

For this week, Mr. Mangun placed the PSEi’s support at 7,792 up to 8,090, while resistance is at 8,360 to 8,465.